LS6 - Economic Systems

Question 1

Unit cost

Answer 1

Average cost to produce a unit of output

Question 2

Market

Answer 2

Where buyers meet to exchange goods and services

Question 3

Price mechanism

Answer 3

Process by which market allocates resources

Question 4

Command economy

Answer 4

Resources allocated solely by state

Question 5

Mixed economy

Answer 5

Resources allocated by state and price mechanism

Question 6

Free market economy

Answer 6

Resources allocated solely by price mechanism

Question 7

Public sector

Answer 7

Part of economy controlled or owned by government

Question 8

Private sector

Answer 8

Part of economy not controlled by government

Question 9

Advantages of free market and mixed economies

Answer 9

Profit motive, leads to wider choice as it incentivises:
- firms to develop new products
- firms to meet consumer demand

(Profit motive absent and limits choice in free market economies and mixed if there are monopolies or concentrated markets)

Quality and innovation higher as there’s competition
Higher efficiency

Question 10

Disadvantages of command economy

Answer 10

Told what to produce so:

• less choice
• lower quality
• no profit motive so low efficiency